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Thursday, May 17, 2012
Feature: July 2007
Midtown Aloft
Urban living means high ceilings and project delays in the grid
Story by Jeff Hudson
Walkable and upscale urban living has existed in bigger cities for decades. Marketed as a hip lifestyle just steps away from entertainment and a short walk from work, these lofts and condos could soon hit the mainstream in Sacramento’s core. But the thrill-seekers of this lifestyle aren’t always the buyers you’d imagine.
Those looking for midtown lofts and condos obviously aren’t looking for a lawn and white-picket fence because — in many cases — they’ve been there, done that.
Sotiris Kolokotronis of SKK Developments is the developer behind the L Street Lofts in midtown. When Kolokotronis held a street fair to promote his 92-unit project in April, the party drew plenty of lookers. Among them were Dean and Carol Shellenberger, a couple in their early 40s. “We lived in midtown when we were young,” says Dean, who works in a law office and spends much of his free time acting in, or directing, community theater.
The couple eventually moved to an East Sacramento house with a yard. “But we both work in midtown,” Dean says. Carol has a job with the state’s Department of General Services.
“We could live in midtown in less space,” Dean continues, with Carol quickly adding she likes “the restaurants and stores and everything.”
Developer Kolokotronis says his project is the first of its kind locally, but he’s seen similar projects in other Western cities: Denver, Portland, Seattle and Los Angeles.
“What the buyers want is sophisticated space that’s close to a lot of amenities and maintenance-free,” Kolokotronis says, “so they can lock the door and travel all over the world.”
Demographics have been changing for homebuyers. In 2006, married couples made up just 61 percent of all homebuyers, according to the National Association of Realtors, down from 70 percent in 1995. This comes as today’s young professionals are waiting longer to get married and start families. In addition, 26 percent of condo-owning households nationwide are made up of married couples without children, according to the U.S. Census Bureau.
“Young professionals like the lifestyle. They want to be where the action is,” Kolokotronis says. “They understand the urban environment. And then there are the people whose families have grown up — they don’t want a lot of space anymore. And then there’s the ‘Capitol crowd.’ They can be elected officials, senior staff or lobbyists. They fly in or drive in on Monday, they’re out by Thursday or Friday. They want something that’s convenient.”
The sales pitch and ads for the L Street Lofts makes that clear, touting a midtown location “where gourmet restaurants take the place of chain restaurants.” To make things even clearer, the brochure features a map showing the neighborhood amenities.
Also at Kolokotronis’ street fair was Todd Scalia, a single 27-year-old professional. “It’s the gentrification of Sacramento. We’re finally keeping people here, rather than seeing them leave,” Scalia says.
The L Street Lofts will occupy an eight-story building, which is currently under construction between 18th and 19th streets and slated for occupancy this fall. Units range from studios to penthouses with high ceilings, open floor plans and other upscale extras. As of June, there were deposits on more than 30 of the units at the L Street Lofts. Not all units have been released for sale.
Even with all of the interest in urban living, it’s taken Kolokotronis several years to make the project happen. He started in summer 2004, a time when the real estate market was booming. “We submitted our plans, finalized development and took it to different stakeholders in the community,” he says. Kolokotronis received entitlements in late 2005, started construction in the second quarter of 2006 and is expecting completion late this year.
Of course, the real estate market looks very different in 2007 than it did in 2004. The pace of sales has cooled, while the cost of construction has gone up, up and further up. During the first few months of this year, those factors put a chill on downtown projects like John Saca’s twin 53-story condo towers between 3rd and 4th streets, which hit a construction halt in January, and Craig Nassi’s 38-story residential tower. Both projects have struggled with financing. Saca was bought out last month.
“But those were never competition for us,” Kolokotronis says. Those projects feature much taller buildings and “a completely different location” on the other side of the Capitol, he continues, compared to the shaded streets around the midtown restaurant scene.
In Sacramento, urban living isn’t limited to lofts. Developer Michael Heller and his partners at LoftWorks broke ground earlier this year on a brownstone project at 26th and N streets.
“These are three-story brownstones as you’d see in Chicago, with brick exteriors, porches and an interior courtyard,” Heller says. “Some have granny flats on the ground floor that can be rented out.”
“The big issue for midtown and downtown is getting your project built.”
— Michael Heller, developer, Loftworks
And Heller expects to have no difficulty selling them. “My business plans have been based on the fact that this market is unique and doesn’t follow the patterns in the suburbs,” he says. “There’s a lot of weakness in the suburbs, but I’m bullish on downtown and midtown.” Heller adds that his past projects in midtown are at least 90 percent occupied.
Another project awaiting development is the old Crystal ice facility on R Street, which is spearheaded by another LoftWorks partner, Mark Friedman of Fulcrum Properties. “It’s two full city blocks, and it will have a strong component of housing,” Heller says. While developers are still hammering out the details for R Street, other projects are moving along the pipeline in the neighborhood.
One of those is Tapestri Square, which would feature 58 brownstone-style units at 2014 T St. Models are slated to open this month. And then there’s Washington Park Village, which is building 52 townhome condos near 16th and D streets, on property that was once the site of truck-loading docks for the Blue Diamond Almond Growers Exchange.
But some midtown projects have halted. LoftWorks backed away from a condo/loft-type project at 16th and O streets, which was planned in conjunction with the Capitol Area Development Authority. “We were confronted with dramatically rising costs of construction at the end of 2006, and rather than dumbing down the design, we elected not to move forward with construction,” Heller says.
Building in midtown and downtown presents a different set of challenges to get the project off the ground. “The big issue for midtown and downtown is getting your project built,” Heller continues. “You have to assemble the land, and in midtown we’re talking about small parcels. It’s always a great challenge to assemble enough land to build a larger-scale project. If it’s owned by different individuals, you need to convince them all to sell or contribute to the partnership.”
If developers can make economic sense of these projects and get the building going, then they’ve got a good chance of selling, Heller adds. “We all know about the high-rise condo projects having challenges right now,” Heller says. “But until we have retrenching of costs of commodities and construction materials, we’re going to have difficulties getting projects off the ground. Rents and sales proceeds haven’t escalated as far as the cost of construction.”
Kolokotronis agrees with Heller, saying he wishes he had another project like the L Street Lofts waiting in the wings. “The construction costs have substantially gone up,” he says. “The cost is higher than what the market is today.”
Whether the former Saca project and Nassi’s project can overcome those costs remains to be seen. Saca’s costs for steel and concrete were estimated to be tens of millions of dollars, according to industry insiders.
Realtor Michael Lyon, who’s involved with marketing the L Street Lofts, Tapestri Square and the River’s Side at Washington Square in West Sacramento, sees plenty of demand for the urban lifestyle. And Lyon says it’s not just empty nesters and single young professionals who are looking at the new units.
“Now you know what we’re starting to see in midtown? Couples with strollers — nesters,” Lyon says. “We’re seeing people with kids, who work in downtown or midtown and want to live nearby. They don’t want to waste money on gasoline, or time away from family, commuting in a car on the freeway. They want a more metropolitan life.”
Lyon sees the trend emerging in a different way than things that happened in, say, Roseville. “When Roseville took off 15 years ago, the early adopters got no restaurants,” Lyon says. “But look what’s happening now. Roseville’s getting restaurants. It was the same in Elk Grove and Natomas … the housing came first, then the restaurants.
“But with midtown, the restaurants are already there. And the jobs are already there,” Lyon says. And now the housing is coming.
Lyon predicts job growth in the downtown and midtown areas will spur the trend. “It’s the area where you’ll see the most job creation in the next 10 years,” he says. “There’s state government, there are three huge hospitals and they’re all expanding. There are going to be a lot of high-paying jobs. That doesn’t answer the question of the cost of construction, but these properties are going to become very valuable.”
Lyon sees two other differences between the downtown and midtown scene and the past boom in the ’burbs: transportation. “In midtown, you have a nightlife that’s walkable. It’s a fun place to live,” he says.
Developer Heller agrees: “Walkability — that’s the beauty of this whole situation. You park your car, and you’re not going back in it. Walkability is fantastic, and Sacramentans are ready to walk the streets.”
A loft by any other name
Renters, buyers and even the elite publication The Atlantic Monthly have pondered the old question: What makes a loft a loft?
Early lofts originated in the 1960s in New York. At that time, artist types searched for cheap space to live and work. They converted sections of old warehouses or light-industrial buildings, sometimes without the benefit of building permits. The stylistic hallmarks included high ceilings with often-visible overhead pipes, open floor plans that provided studio space, sleeping quarters and a lot of glass allowing natural light.
Those early lofts also represented an attractive, urban, and somewhat bohemian lifestyle — a concept that has since caught on in many cities, including Sacramento.
A local example of this conversion is the Elliott Building at 16th and J streets, which opened in 2003. The project converted an 80-year-old structure, formerly an auto showroom, into restaurants, retail and 18 live-work lofts. In 2005, the adjacent O1 Lofts opened and now house a downstairs restaurant and furnishing studio. That’s in addition to 14 lofts on the top floors. LoftWorks, a partnership including local developers Mark Friedman and Michael Heller, designed both of these projects.
Now, Sacramento will soon be home to a slew of “built-from-scratch” lofts, in brand-new, multi-story buildings. These luxurious residences feature several floors of for-sale and rentable units. The L Street Lofts, near 18th and L streets, are still under construction, but due for occupancy this year. These lofts have high ceilings, plenty of glass and open floor plans. There are also similar loft projects slated for the R Street corridor.
But when it comes to lofts, “the style is less about architecture than about a particular ideal of urban life: informal, open to new experiences, self-created and close to the action,” wrote author Virginia Postrel in a recent issue of The Atlantic Monthly.
Be that as it may, the term “loft” is currently way hipper than “apartment.” And because the former is not copyrighted, marketers can (and do) adapt it as they wish. For example, loft-seekers can stumble upon housing units with high ceilings in sprawling, car-oriented, suburban North Natomas marketed as lofts.
— Jeff Hudson
Lofts … in Woodland?
With all the hype over lofts and condo living, the suburbs just couldn’t resist. One project in the works is an infill development on Main Street in downtown Woodland. The area is already home to local landmarks, including the Woodland Opera House built in 1896 and the Yolo County Courthouse built in 1917. Pretty soon, it will be home to a $60 million loft project rising from the site of a former auto dealership.
Developer Larry Andrews plans to start taking reservations on the City Center Lofts sometime next year. The project will have 171 for-sale units in two buildings that are five and six stories with some zoned for live-work use.
Michael Lyon, CEO of Lyon Real Estate, says he expects to see lofts surface in other Capital Region communities. “You’re going to see them pop up in areas where the [conventional] housing is expensive,” Lyon says. “Like El Dorado Hills, where there’s a large aging population, people who don’t want to move. And you’re going to see them in Roseville, because it’s a job center.” Downtown Davis would be another likely spot because of continued expansion at UC Davis and many workers could live within walking distance of campus jobs.
Andrews says Woodland is ready for the lofts because high-end amenities have already popped up nearby, such as Nugget Market, a wine room and dozens of restaurants, including an outdoor restaurant area off Dead Cat Alley. Units will feature a lot of glass and high ceilings. Some will be zoned for live-work use, with a home business on the ground floor and living space above. “Lofts have been completely reinvented. There’s no comparison with what we called lofts in the 1990s,” Andrews says. “Many buyers wouldn’t want to live in anything else.”
— Jeff Hudson
